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Worth notingMarket eventFri, Oct 232 min read
Demand supports sales, but persistent price pressures could delay interest-rate relief and keep business financing expensive.
S&P surveys of US businesses showed activity growing modestly more slowly in October, while customer demand remained strong and companies hired more workers to meet it.[1][2]
Robust demand allowed businesses to raise prices for goods and services; the coverage warned that inflation could rise further and remain persistently high in the coming months.[1]
Strong demand gives businesses room to sell more and pass costs on through higher prices. That can protect profits, provided selling prices keep pace with costs and customers keep buying. The surveys showed companies adding workers and trying to pass price pressures on to customers.[2]
If those increases keep inflation elevated, the Federal Reserve may have less room to cut interest rates, leaving businesses that borrow or refinance maturing debt facing expensive financing.[1] On October 23, two-year and 10-year Treasury yields stood at 4.69% and 5.00%, respectively, both up 0.04 percentage points from the previous session. These yields help set market borrowing costs, although the supplied evidence does not establish that the surveys caused the day's increase.
Strong demand encourages hiring and gives businesses room to raise prices. Companies able to pass costs on to customers have a better chance of protecting profits; those with less pricing power may face pressure on profit margins.[1][2]
If persistent price pressures delay rate cuts, companies seeking new loans or refinancing maturing debt could face high financing costs for longer, limiting investment and profits.[1]